Gifts Today magazine

Morrisons results are the ‘new normal’ for supermarkets, says leading retail expert

Following news this morning of Morrisons’ pre-tax profit report of £345 million – the worst in eight years and down 52 per cent on the previous year – a leading retail expert has warned that supermarkets should come to expect low margins as the ‘new normal’ in today’s cut-throat shopping landscape.

Heiner Evanschitzky, Professor and Chairman of Marketing at Aston Business School, says: “Supermarkets have to get used to this ‘new normal’ of low profit margins and must adapt accordingly. The discount retailers like Aldi and Lidl have fundamentally disrupted the market and the Big Four – Tesco, Morrisons, Asda and Sainsburys – must accept their losing market share.”

Professor Evanschitzky urges the Big Four supermarkets to close their least profitable stores. “The best option for them now is to shrink their businesses gracefully.”

“News that Morrisons’ profits have sunk is unsurprising after their campaign of price-slashing. More worrying is the fact that sales have dropped – something you would hope to avoid when slashing prices. It’s fair to say that their strategy of price-slashing has failed. This is a clear example of how not to save a supermarket brand.”

He concludes: “Retailers need to look back at history and see how other businesses managed to shrink profitably – or failed in doing so. Look at former state-run monopolies like BT or even banks like RBS that have been forced to shrink. There are important lessons to be learned that supermarkets must take on board.”

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